Customer Accounts - KM
Which of the following is not an example of a discretionary order? A) "Sell some of my ABC stock today if you hear something bad" B) "I own 1,000 shares of LBK. Please sell it all when the market opens" C) "Buy shares of a social media stock sometime today" D) "Buy as much HMK stock as you think I should if you hear good news today"
"I own 1,000 shares of LBK. Please sell it all when the market opens"
Which of the following is an example of a "not held" order? A) "sell enough of my XYZ stock so that I can purchase as much MJK stock as you can get" B) "buy 500 shares of any food company, as my portfolio could use a boost" C) "sell one of the three gaming stocks that I own today" D) "buy 200 shares of ABC stock sometime today"
"buy 200 shares of ABC stock sometime today"
A payment shortage of ________ or less may be disregarded at the discretion of the broker-dealer.
$1,000
Under SIPC, each customer's account is insured for A) $500,000, with cash not to exceed $250,000 B) $600,000 in bonds and cash C) $500,000 on bonds D) $250,000 in cash
$500,000, with cash not to exceed $250,000
tools of monetary policy
- open market operations. - reserve requirements. - the discount rate.
The initial margin requirement for the purchase of an equity call or put option with 9 months or less until expiration is A) 75% of the premium B) 100% of the premium C) 25% of the premium D) 50% of the premium
100% of the premium
An investor has $200,000 of cash in a brokerage account with a broker-dealer that goes bankrupt and SIPC reimburses all of it. What is the maximum additional value of lost securities for which SIPC will reimburse the same investor in his account with the same broker-dealer? A) 300000 B) 50000 C) None D) 800000
300000
What is the maximum amount of stocks a customer can buy when opening a new margin account with a cash deposit of $25,000? A) 50000 B) 2000 C) 12500 D) 25000
50000
An investor sells short 100 shares of XYZ stock at 56 and buys 1 XYZ 60 call for 2 when the market price of XYZ is 59. What is the investor's breakeven on this combined position? A) 54 B) 58 C) 55 D) 62
54 When an investor buys a call to protect a short stock position, the investor will breakeven when the stock price is equal to the price at which the stock was sold short minus the call premium paid. 56 - 2 = $54. The investor is bearish and will make money only when the short position can be bought in at price below this point because of the premium that was paid for the call.
All of the following statements regarding the margin account disclosure statement are true EXCEPT A) A follow-up margin disclosure must be delivered to all margin customers at least once every 3 years in writing or electronically B) Delivery of the margin account disclosure statement is required at or prior to the opening of the account C) Margin account disclosure delivery can take place physically in hard copy form or electronically D) The margin account disclosure must inform the customer that the firm can force the sale of assets without the customer's approval to meet a margin call
A follow-up margin disclosure must be delivered to all margin customers at least once every 3 years in writing or electronically
According to Rule 144, which of the following persons is NOT a control person? A) A person who owns more than 10% of the outstanding voting stock of the issuer B) A non-affiliate who has obtained non-public information about the issuer of the stock C) A relative who lives in the same household as a control person D) An individual who serves as a director of the issuer of the stock
A non-affiliate who has obtained non-public information about the issuer of the stock
on artist calls a broker and places an unauthorized trade in a client's account, using a voice replication program, how can the client find out about the trade and cancel it on a timely basis? A) A monthly brokerage statement B) A quarterly summary of account transactions C) A trade confirmation D) Direct communication with the broker
A trade confirmation
If a broker-dealer customer wants to open a trust account, what documentation will be required? A) A will B) A general liability release C) A trust agreement D) A perpetual power-of-attorney
A trust agreement
The Municipal Securities Rulemaking Board (MSRB) is an example of what type of regulatory organization? A) A self-regulatory organization B) An all-electronic exchange C) A rule-enforcing organization D) An operational arm of the SEC
A self-regulatory organization
Paul's broker recommends that he buy 300 shares of Microsoft stock. However, he does not specify any recommended price. Paul pays the broker a commission on the trade. The customer confirmation will show that this order is A) A principal trade B) A trade with a markup C) An unsolicited trade D) A solicited trade
A solicited trade A solicited trade is one in which the registered representative makes a recommendation. The recommendation need not include all essential elements of the trade - e.g., price, quantity, security. A trade that shows a commission on the confirmation is an agency trade, not a principal trade.
Which of the following is a reason why a broker-dealer may impose a 10- business day hold on disbursements from a customer's account? A) An initial 15- business day hold has terminated, and the firm is continuing to review the facts and circumstances surrounding potential financial exploitation of the account. B) The customer has informed the firm that he will be traveling for the next two weeks. C) The hold can be imposed if the customer request has been received via email rather than through a verbal request on the phone. D) It is FINRA policy to require a firm to impose such a hold until the request can be re-confirmed with the customer.
An initial 15- business day hold has terminated, and the firm is continuing to review the facts and circumstances surrounding potential financial exploitation of the account.
When must a broker-dealer ensure that a recommended security is suitable for its customer? A) As long as the customer stays with the firm B) At the point of sale C) At the point of sale and for one year following the sale D) For the life of the investment
At the point of sale
Of the following, which investment choice is most appropriate for a high net worth investor with a primary objective of long-term safety of principal? A) A C rated general obligation bond B) A highly rated tax anticipation note C) A non-investment grade corporate bond D) An investment grade revenue bond
An investment grade revenue bond its a municipal revenue bond - how da hell was i suppose to know that
A customer in a high tax bracket would like to establish a well diversified, tax advantaged portfolio with a $25,000 investment. The investor also wishes to protect the investment from principal risk. Which of the following is most appropriate? A) An investment in a municipal bond fund B) The purchase of several municipal bonds of different issuers, geographic locations and maturities C) A municipal bond laddering strategy that is protected from risk with the purchase of portfolio insurance D) An investment in a U.S. government money market fund
An investment in a municipal bond fund
All of the following constitute a guarantee against loss EXCEPT A) An offer to waive any fees for assets under management if the account loses value B) A promise to reimburse a customer for potential future losses from securities purchased in a principal transaction C) An offer to buy back a security at a predefined date if it does not meet performance targets D) An offer to reimburse a customer for losses on a municipal bond that was purchased in error for the customer's account
An offer to reimburse a customer for losses on a municipal bond that was purchased in error for the customer's account
According to industry regulation on customer privacy, a customer of a broker-dealer is permitted to opt out of sharing information with which of the following entities? A) A law enforcement agency that is investigating alleged financial fraud B) A subsidiary of the broker-dealer that offers a customer record keeping service C) An unaffiliated third party D) The broker-dealer for the purpose of marketing other products to the customer
An unaffiliated third party
Municipal dealer B is preparing to publish an advertisement online which will promote the enhanced facilities of your firm in the municipal securities arena. This advertisement must be A) Submitted to the MSRB and approved by a municipal securities principal prior to use B) Approved by a municipal securities principal or a general securities principal prior to use C) Submitted to, and approved by, the MSRB prior to initial use D) Approved by a general securities principal prior to use
Approved by a municipal securities principal or a general securities principal prior to use
Funding for the Securities Investor Protection Corp. (SIPC) comes mostly from what source? A) Direct U.S. Treasury appropriations B) Earnings on special issue U.S. Treasury obligations C) A transaction tax on securities trades D) Assessments against broker-dealers' gross revenues from their securities business
Assessments against broker-dealers' gross revenues from their securities business
What happens to assets held in an individual brokerage account after the owner's death, when the owner has not designated a beneficiary? A) Cash is distributed to an escrow account and securities are impounded B) Assets are disposed of according to terms of the owner's will or trust C) Assets automatically go to the surviving spouse D) Assets automatically go to the surviving children
Assets are disposed of according to terms of the owner's will or trust
When must the brokerage firm deliver a customer confirmation to the customer? A) At or before completion of each transaction B) When an order is placed C) Upon the customer's request D) Within three days of trade date
At or before completion of each transaction
A revocable trust can be altered or cancelled A) With the consent of the state where the trust was drawn. B) Under no circumstances C) Only with the beneficiary's written consent. D) At the discretion of the trustor.
At the discretion of the trustor. A revocable trust can be altered or modified as the trustor wishes. Beneficiary consent not required in this instance.
If a broker-dealer goes bankrupt, what is the first important action SIPC will take to protect its investors? A) Liquidate any securities that appear illiquid or likely to suffer losses B) Prorate cash among all investors C) Attempt to locate and replace any securities lost D) Seize all securities held in street name
Attempt to locate and replace any securities lost
What is the typical sequence for the order period: I. Designated Orders II. Group Orders III. Member Orders IV. Presale Orders A) I, II, III, IV, B) IV, II, I, III, C) IV, I, III, II, D) IV, III, II, I,
B) IV, II, I, III,
A principal who is reviewing the suitability of an account in order to accept it on behalf of the broker-dealer must A) confirm the objectives with the representative before approving the account. B) ensure that the investment objective of the account is appropriately aligned with the risk profile of the customer. C) wait 30 days for the customer to verify the account suitability information before the account can be approved. D) verify all financial information.
B) ensure that the investment objective of the account is appropriately aligned with the risk profile of the customer.
Which of the following instruments does not offer tax-deferred growth to the investor? A) Blue chip stock B) Individual retirement account C) Variable annuity D) Non-qualified retirement plan
Blue chip stock
Interest charges in a margin account are based on the A) Broker call rate B) Discount rate C) Federal funds rate D) Prime lending rate
Broker call rate
Regulation T requires a customer to deposit funds when A) Buying a municipal bond B) Effecting a short sale of stock C) Making a purchase of stock D) Buying or selling common stock
Buying or selling common stock
Regulation T requires a customer to deposit funds when A) Effecting a short sale of stock B) Buying a municipal bond C) Making a purchase of stock D) Buying or selling common stock
Buying or selling common stock Regulation T applies to both purchases and short sales of equity securities.
A customer expects to be living abroad and requests in writing that his brokerage firm hold his mail for a period of six months. The firm must A) decline the request. B) accept the request in all cases. C) ask the customer to verify an acceptable reason for holding mail beyond three months. D) hold the customer's mail, but not for more than one month.
C) ask the customer to verify an acceptable reason for holding mail beyond three months.
An owner of an individual brokerage account has given trading authority to his son. After the owner's death, the son A) can place sell orders, but not buy orders. B) can only continue trading the account if he is the beneficiary of the account. C) cannot continue to trade the account. D) can continue to trade the account for only a period of 30 days after death.
C) cannot continue to trade the account.
On trade confirmations, what is the name of the unique identification number assigned to identify each security? A) NET Framework B) TASM C) ISSN D) CUSIP
CUSIP
The number that is assigned to an issue of securities to identify and track them is the A) series number. B) CUSIP number. C) certificate number. D) catalog number.
CUSIP number.
A customer complaint involving theft or forgery must be reported to FINRA I. Within 20 days II. Within 10 days III. If it exceeds $10,000 IV. Regardless of the dollar amount A) II and IV B) II and III C) I and III D) I and IV
II. Within 10 days IV. Regardless of the dollar amount
Which of the following is true regarding the impact of inflation on a U.S. Dollar-based fixed-income security? A) Inflation will increase the value of the dollar, thereby increasing demand and the price for USD bonds. B) Inflation will likely lead to lower interest rates and therefore increasing the price of USD bonds. C) Deflation will increase the purchasing power of USD bonds. D) Inflation will increase the purchasing power of interest payments and therefore increase the price.
Deflation will increase the purchasing power of USD bonds. In an inflationary environment, prices of goods are increasing. This will lead to lower purchasing power for fixed income securities. Also, inflation generally leads to higher interest rates, which will lead to a fall in price for bonds. Deflation, on the other hand, means products are cheaper, yielding higher purchasing power.
The accrued interest that is added to the price the seller receives at settlement of a municipal bond that was purchased in a secondary market transaction A) Does not include interest paid on the settlement date. B) Starts on the day following the prior interest payment date. C) Is calculated based on actual day months. D) Starts on the dated date.
Does not include interest paid on the settlement date. Accrued interest for municipal bonds is calculated based on 30-day months, and starts on the date of the prior interest payment. It does not include interest payable on the settlement date. The dated date is only relevant for the calculation of accrued interest on newly issued municipal bonds.
A customer must sign a Margin Agreement in order to A) Purchase a stock and make full payment to the firm B) Effect a short sale in their brokerage account C) Make an investment in a money-market mutual fund D) Purchase a speculative growth stock
Effect a short sale in their brokerage account
Which securities settle on a T+1 settlement cycle? A) Government securities and options B) Corporate and municipal bonds C) Mutual funds and ETFs D) Limited partnerships
Government securities and options
An investor that wants the option to invest in a portfolio of diversified common stocks that can be easily liquidated at current market prices should consider a A) Equity Growth and income CEF B) Blue Chip mutual fund C) Convertible security CEF D) Value mutual fund
Equity Growth and income CEF
If a margin account customer has failed to meet the Reg T settlement date because of special circumstances, a broker-dealer may request an extension from A) FINRA. B) the SEC. C) Securities Investor Protection Corporation. D) the Federal Reserve Board.
FINRA
A government-sponsored enterprise that purchases and securitizes mortgages to ensure that funds are available for lending to home buyers is A) Department of Housing and Urban Development (HUD) B) American Depository Receipts (ADRs) C) Federal National Mortgage Association (FNMA) D) Government National Mortgage Association (GNMA)
Federal National Mortgage Association (FNMA)
An investor purchases an index 452 call for a premium of 9. At expiration the index value is 471. Which two of the followings statements are TRUE? I. The call is in the money at expiration II. The breakeven of the contract is 463 III. The investor will receive $1,900 at exercise of the contract IV. The investor will receive $1,000 at exercise of the contract A) I and III B) II and III C) I and IV D) II and IV
I and III
Which TWO of the following statements are TRUE of a principal's approval of a new opened account? I. It must be in writing. II. It indicates that all the account information is complete and correct. III. It indicates that the account is appropriate for the person opening the account based on the information collected. IV. It must be kept in the customer account file that is maintained by the representative who opened the account. A) I and III B) I and IV C) II and IV D) II and III
I. It must be in writing. III. It indicates that the account is appropriate for the person opening the account based on the information collected.
The impact of an increase to Reg T initial requirements is which two of the following? I. Reduction in buying power II. Increase in buying power III. Increase in leverage available to investors IV. Decrease in leverage available to investors A) I and III B) II and III C) I and IV D) II and IV
I. Reduction in buying power IV. Decrease in leverage available to investors
Broker-dealers are prohibited from charging service fees for which two of the following activities? I. Sending proxy statements to customers II. Collecting dividends III. Providing research reports IV. Safekeeping of securities A) II and III B) II and IV C) I and IV D) I and III
I. Sending proxy statements to customers III. Providing research reports
The pre-dispute arbitration clause that is signed by a registered representative when the Form U-4 is completed requires arbitration as a means of settling a dispute I. Involving employment discrimination II. Between the representative and another representative at the firm III. Between the representative and her supervisor A) II and III only B) I, II and III C) I and III only D) I and II only
II and III only
A customer who has an individual IRA account calls his broker-dealer to request that the account statements be held by the firm while the family is vacationing in Europe. The firm will take which two of the following actions? I. Honor the request over the phone II. Ask the customer to put request in writing III. Hold the mail for a maximum two months IV. Hold the mail for a maximum of three months A) II and IV B) II and III C) I and IV D) I and III
II and IV
The provisions of the MSRB's Telemarketing Rule I. Apply to telephone communication only II. Apply to telephone and fax communication III. Require firms to maintain a do not call list IV. Apply to existing customers of the firm A) I and III B) II and IV C) I and IV D) II and III
II. Apply to telephone and fax communication III. Require firms to maintain a do not call list
A broker-dealer that fills a customer purchase order from its inventory must include which TWO of the following items on the trade confirmation? I. Agent capacity II. Principal capacity III. Commission charged IV. Markup charged A) II and IV B) II and III C) I and IV D) I and III
II. Principal capacity IV. Markup charged
With regard to UGMA and UTMA accounts, which two of the following statements are TRUE? I. The custodian and the donor must be the same person II. The Social Security number of the minor must be listed on the account III. There is no annual limit on the size of the gift IV. There may be more than one minor listed on the account A) I and IV B) II and III C) I and III D) II and IV
II. The Social Security number of the minor must be listed on the account III. There is no annual limit on the size of the gift
Under the terms of a selected dealer agreement, participant firms I. act as principal II. act as agent III. may distribute registered securities only IV. may distribute either registered or unregistered securities A) I and III B) II and III C) II and IV D) I and IV
II. act as agent IV. may distribute either registered or unregistered securities
Which two of the following are likely to be included in variable annuity subaccounts, but not in the general account of an insurance company? I. Corporate bonds II. mutual funds III. ETFs IV. U.S. Treasury securities A) I and IV B) II and IV C) II and III D) I and III
II. mutual funds III. ETFs The separate account of the insurer that provides variable products offers growth opportunities for purchasers. Equity products like mutual fund and ETF subaccounts are found in separate accounts but not in the insurer's general account.
All of the following are credit items in the computation of the balance of trade EXCEPT A) Exports B) Imports C) Foreign investment in the U.S. D) Foreign spending in the U.S. economy
Imports Balance of trade is the difference between a country's exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy.
A type of trust which can only be altered with the consent of the trust beneficiary is a A) Revocable trust B) Executor trust C) Irrevocable trust D) Living trust
Irrevocable trust
A customer would like information about the financial condition of the firm they are dealing with. This information A) Is available upon request. B) Is available only to institutional clients of the firm. C) Must be requested through the SEC only. D) Is proprietary and may not be shared with customers.
Is available upon request.
A city wishes to take advantage of liquidity and professional management in the investment of excess funds. An investment that is appropriate for this purpose is A) COP. B) VRDO. C) BAB. D) LGIP.
LGIP.
Which of the following account types require an additional disclosure document to be delivered at or prior to the account opening? A) Margin account B) Joint Account C) Cash account D) Special cash account
Margin account
What type of employer contribution to a 401(k) plan is made only for participants who elect to defer part of their pay into the plan? A) Discretionary B) Nonelective C) Incentive D) Matching
Matching
A customer makes a stock purchase and two months later the company goes bankrupt and the stock becomes worthless. The registered rep A) May suggest that if the client's next investment does not go well, the firm will reverse the commission charges for that trade. B) May not offer to reimburse this customer, as no guarantees may be made against financial loss. C) Can offer to provide commission rebates to this customer on their next few trades, in order to retain the client relationship. D) May offer to reimburse the customer for the loss since they have a good relationship.
May not offer to reimburse this customer, as no guarantees may be made against financial loss.
FDIC insurance covers losses in each of the following types of products offered by banks EXCEPT: A) CDs B) Checking accounts C) Money market mutual funds D) Interest-bearing savings accounts
Money market mutual funds
If a representative comes into contact with suspicious activity involving currency transactions, the representative should A) File a CTR B) Contact the FBI C) Report the activity to his supervisor D) File an SAR
Report the activity to his supervisor
For communications with the public to be treated as institutional, what is the maximum number of retail investors to which it may be distributed? A) 24 B) Five C) 15 D) None
None
Which of the following statements is TRUE regarding official statements for new issues of municipal securities? A) Issuers must prepare an official statement for all new issues B) If available, an official statement must be filed with the SEC prior to the offering C) Issuers are subject to registration and filing requirements of the Securities Act of the 1933 D) Official statements are used by syndicates in the marketing of the issue
Official statements are used by syndicates in the marketing of the issue
An investor writes a call to increase income to his portfolio. In establishing this position this investor has engaged in an A) Closing purchase B) Opening sale C) Opening purchase D) Closing sale
Opening sale
A customer calls to insist on placing an order for municipal securities that you believe is inappropriate for the investment objectives of the account. You should A) Place the order and mark the order ticket unsolicited B) Refuse to place the order C) Place the order, mark the order ticket unsolicited and obtain signed and dated documentation from the customer for their file that specifies circumstances of the trade. D) Refuse to place the order and document your reason in writing. Documentation should be dated and kept in the customer's file with your signature.
Place the order, mark the order ticket unsolicited and obtain signed and dated documentation from the customer for their file that specifies circumstances of the trade.
Fee-based accounts are most appropriate for customers who will A) Trade only when major news is released on a company. B) Create a diversified portfolio and monitor it on a quarterly basis. C) Place trade orders every day D) Buy and sell stocks and bonds based on suggestions provided on investing websites.
Place trade orders every day
Commingling is a prohibited practice because it A) Provides the registered rep with unauthorized access to the customer's assets B) Places the broker-dealer's position at risk C) Places the customer's securities at risk D) Allows other customers to gain access to a customer's account
Places the customer's securities at risk
With respect to a "not held order", the registered rep is selecting the A) Price and quantity B) Quantity and time C) Asset and price D) Price and/or time
Price and/or time
Pursuant to Regulation S-P, a broker-dealer must provide a privacy notice to a customer A) Prior to engaging in any securities business with that customer. B) When a confirmation of a trade is sent. C) At the time a solicitation is made to purchase a security. D) When a statement of account is sent.
Prior to engaging in any securities business with that customer.
In a short account, if the equity position in the account falls below 30%, a call for additional funds will be issued and must be satisfied A) Within two business days. B) Promptly. C) Within the hour. D) As soon as the customer is able to deposit the funds.
Promptly.
Which of the following is a permitted investment in an IRA brokerage account? A) Most collectibles B) Antiques C) Life insurance D) Specified gold coins minted by the Treasury
Specified gold coins minted by the Treasury
A husband and wife wish to open a brokerage account in which the husband will own 60% and the wife 40%. At either owner's death, the owner's portion will be liquidated and distributed to his/her beneficiary. What type of account should they open? A) Partnership B) Tenancy in common C) Tenancy by the Entirety D) Joint Tenancy with Rights of Survivorship
Tenancy in common
What entity stands behind the deposit insurance offered by the Federal Deposit Insurance Corporation (FDIC)? A) Private insurance companies B) A consortium of financial institutions C) The U.S. Government D) The Federal Reserve
The U.S. Government
The initial privacy notice that is provided to a new customer must include all of the following EXCEPT A) The location of backup customer files and the name of the company responsible for providing the service B) How information that is collected is safeguarded from breaches C) How confidential customer information will be used by the firm D) The type of private information that will be collected
The location of backup customer files and the name of the company responsible for providing the service
Regarding penny stocks, which of the following statements is not accurate? A) There are special suitability requirements for investors who trade penny stocks B) Their market price is under $5 per share C) They are considered extremely risky D) They can always be purchased on margin
They can always be purchased on margin OTC stocks can only be purchased on margin if approved by the Federal Reserve Board.
An investor would most likely buy a floating rate security issued by the U.S. Treasury for which of the following reasons? A) To protect against interest rate volatility B) To receive interest that is tax exempt at the federal level. C) To hedge a portfolio from systemic risk D) To benefit from interest rate arbitrage
To protect against interest rate volatility
In which of the following situations would it be appropriate for a registered representative to lend money to a client without receiving permission from the firm? A) The client is waiting for a paycheck to clear and would like to make a stock purchase now. B) The client is a financial institution engaged in the business of lending money. C) The client and the rep are partners in a joint venture outside the brokerage relationship. D) The rep and the client have been close personal friends for many years pre-dating the client relationship.
The client is a financial institution engaged in the business of lending money.
A broker-dealer has just received the new account paperwork for an UGMA account. Which of the following parties' names appears on the account form? A) The primary donor to the account B) The beneficiary of the account C) A principal of the firm D) The custodian of the account
The custodian of the account
The securities lending unit of a broker-dealer borrows shares owned by a mutual fund and loans them to its customer, who then sells them short to another investor. Which entity has the least amount of price risk associated with these securities, under this arrangement? A) The investor who purchases the shares sold short B) The broker-dealer C) The mutual fund D) The customer who sells short
The broker-dealer The securities lending units of broker-dealers act as middle-man in these transactions, with no price risk. The mutual fund and the investor who purchases the short shares have price risk if shares decline in value. The customer who sells short has risk if shares rise in value.
All of the following disclosures are likely to be found in the margin account disclosure page given to customers EXCEPT A) The broker-dealer can sell out securities in the account without notice. B) Loss in a margin account can exceed the amount contributed to the account. C) Customers are not entitled to extensions of time for a margin call. D) The broker-dealer can increase house maintenance requirements, but only if advance written notice is given.
The broker-dealer can increase house maintenance requirements, but only if advance written notice is given.
When explaining the features of a limited partnership interest to a prospective customer, a registered representative must explain that A) The tax benefits of the partnership are the primary reason to invest B) Limited partners will have the opportunity to vote regularly on management strategy for the partnership C) The value of that partnership interest will vary daily based on market valuation determined by exchange trading D) The liquidity of the partnership interest may be very limited
The liquidity of the partnership interest may be very limited
Last year a client opened a new account, giving discretion to his son for all trades. Last month the client was declared legally incompetent in court. What is the status of the power of attorney the client originally signed when the account was first opened? A) The power of attorney remains in force if it was a durable power of attorney. B) The power of attorney must be renewed by an officer of the court. C) The power of attorney remains in force until the client passes away. D) The power of attorney is no longer in effect.
The power of attorney remains in force if it was a durable power of attorney. A durable power of attorney will remain in force if a client is declared legally incompetent in a court; otherwise it will be cancelled. All powers of attorney will be terminated upon the death of the customer.
A municipal securities dealer has a control relationship with an issuer in which of the following circumstances? A) An employee recently made a $25 campaign contribution to the mayoral campaign B) The president of the firm is also head of the municipality's school board C) The dealer recently handled a negotiated underwriting for the issuer D) The president of the firm lives within the community
The president of the firm is also head of the municipality's school board
In order to execute a short sale, A) the prior written approval of a principal must be secured due to the inherent risks involved. B) a cash or margin account may utilized. C) a margin account must be utilized. D) a cash account must be utilized.
a margin account must be utilized.
John has purchased 5,000 shares of Issuer X. The confirmation that John will receive will not disclose A) The time his order was received by his firm B) Execution quantity C) Date of the transaction D) Capacity of broker-dealer
The time his order was received by his firm
What does yield to maturity (YTM) measure in a bond, assuming the bond is held to its scheduled maturity? A) The value of interest payments B) Total return C) Yield discounted by time value D) Yield
Total return YTM measures the total return of a bond, held from the current date through scheduled maturity. It includes both scheduled interest payments and any capital gain or loss - i.e., the difference, if any, between the current price and maturity value. The denominator in YTM is the current bond price. So, YTM changes as current bond prices change.
Which of the following items is not part of a standard Margin Agreement? A) Hypothecation Agreement B) Credit Agreement C) Truth-in-lending form D) Loan consent form
Truth-in-lending form
What is the maximum amount of cash most broker-dealers allow customers to maintain in a cash account? A) Up to the SIPC limit B) $1 million C) Up to the FDIC limit D) Unlimited
Unlimited Customers may keep unlimited amounts of cash in a cash account, and most broker-dealers pay money market interest rates on cash balances. However, SIPC only covers up to $250,000 of cash.
A broker-dealer "re-hypothecates" securities that its customers hold in margin accounts. Which of the following statements best describes this practice? A) Holding securities in a special escrow account B) Selling securities, if necessary, to meet margin calls C) Haircutting the value D) Using customer securities as collateral for the broker-dealer's own borrowing
Using customer securities as collateral for the broker-dealer's own borrowing
A well- known individual would like to open a securities account at Broker-dealer A. Is there a way for this person to open this account but remain anonymous on the firm's records to protect their privacy? A) Yes, she may open a "numbered" account and sign a statement evidencing her legal ownership of the account. B) No, as all accounts must prominently carry the account holder's name and address and other required information. C) No, as SEC insider trading rules require that all eligible adults provide their legal identities along with acceptable documentation of this information. D) Yes, but she would need to provide an IRS tax waiver to the firm in order for her identity to remain anonymous on the firm's records.
Yes, she may open a "numbered" account and sign a statement evidencing her legal ownership of the account.
If a bond trades with a dollar price, the confirmation must include which of the following types of yield? A) Taxable-equivalent yield B) Current yield C) Yield to worst D) Holding period yield
Yield to worst
A broker-dealer offers its customers an arrangement under which the customer pays an annual fee of 1.2% of assets under management, instead of per-trade commissions. This arrangement is called A) a wholesale fee arrangement. B) a fee-based account. C) a discretionary account. D) a fiduciary account.
a fee-based account.
A broker-dealer acts on behalf of a customer to purchase stock to fill the customer's order. The confirmation of the sale must report this trade as A) a principal trade and disclose the commission. B) an agent trade and disclose the markup. C) an agent trade and disclose the commission. D) a principal trade and disclose the markup.
an agent trade and disclose the commission.
Limited Partnership interests are typically regulated A) as insurance products, under state law B) as private contracts C) as securities, under federal and state laws D) as securities, under state law only
as securities, under federal and state laws
The Securities Investor Protection Corporation (SIPC) protects customers from A) broker-dealer financial failure. B) market loss. C) issuer bankruptcy. D) identity theft compromising customer accounts or the broker-dealer.
broker-dealer financial failure.
The act of combining customer and broker-dealer securities together is A) integration B) commingling C) aggregating D) combining
commingling
In a corporate account, the document that identifies the persons who are permitted to make trades on behalf of the corporation is the A) power of attorney. B) articles of incorporation. C) corporate resolution. D) corporate charter.
corporate resolution.
In margin accounts, broker-dealers charge customers a competitive rate of interest on the amount borrowed, which is called A) securitized lien. B) loan principal. C) collateral. D) debit balance.
debit balance.
For existing customer accounts, how often are broker-dealers required to send a written notice to the customer for verification of account information? A) every two years. B) every 5 years. C) annually. D) every 3 years.
every 3 years.
Under the Maintaining Qualification Program, a candidate in good standing can maintain their registration for up to: A) three years B) five years. C) two years. D) one year.
five years.
Churning is best defined as A) frequent buying and selling by a mutual fund. B) excessive trading in the account of a retail customer. C) day trading by an institutional investor. D) portfolio adjustments made on a quarterly basis.
excessive trading in the account of a retail customer.
A customer has opened a cash account and purchased 100 shares of stock. If the transaction is subject to regular way settlement, payment for the stock must be made A) three business days after the trade date. B) on the business day after the trade date. C) four business days after the trade. D) on the date the trade is made.
four business days after the trade.
To avoid frozen account status or a possible sell out, Reg T requires that a customer make payment for a purchase A) the business day after the trade date. B) three business days after the trade date. C) four business days after the trade. D) on the trade date.
four business days after the trade.
A representative's personal account has been identified for review because of account activity in which securities were bought and quickly sold, often on the following day. This may be evidence of the prohibited practice called A) selling away. B) freeriding. C) commingling. D) front-running.
freeriding.
Local Government Investment Pools (LGIPS) are formed by states to
give local governments a money market like option for investment of excess funds.
A registered representative wishes to leave her broker-dealer, join a new securities firm, and continue to receive trailing commissions on a lucrative book of business at the old firm. This is only possible A) if she agrees to receive payments as an annuity with a period certain of not less than 10 years. B) if she retires from the securities industry for at least two months, before joining a new firm. C) if she agrees contractually not to continue soliciting business from existing customers. D) in no case.
in no case.
A customer's request to a brokerage firm to hold her mail must be A) in writing, if the mail is to be held for more than one month. B) in writing only if the customer is incapacitated. C) in writing, if the mail is to be held for up to two months. D) in writing, in all cases.
in writing, in all cases.
broker call rate is assesed by
individual banks
In a cash account, a customer purchases a security and sells the same security without first paying for the original purchase. This transaction A) is a violation of Reg T and FINRA freeriding rules, and will cause the account to be frozen, and the broker-dealer will hold the sale proceeds until the original transaction has been paid for. B) will cause the account to be frozen, but the sales proceeds may be used to cover the cost of the original purchase. C) is permissible as long as the sales proceeds cover the purchase amount. D) is a violation of Reg T and FINRA freeriding rules, and the account must be suspended.
is a violation of Reg T and FINRA freeriding rules, and will cause the account to be frozen, and the broker-dealer will hold the sale proceeds until the original transaction has been paid for.
A trust is best characterized as an entity formed to A) manage the assets of a beneficiary. B) ensure an investor will have positive returns in the securities markets. C) provide asset allocation advice to a custodian acting for a minor. D) receive and pay bills for the estate of a deceased party.
manage the assets of a beneficiary.
The court appointed guardian is entrusted to A) provide investment recommendations to a senior investor. B) manage the assets of a minor. C) administer the affairs of the estate of a deceased party. D) oversee the property of an incompetent individual.
manage the assets of a minor.
An investor purchasing a Treasury bond A) must make full payment for the bond through a broker-dealer B) may do so on margin through a broker-dealer C) may not do so on margin D) must open an account with the US Treasury department and adhere to their credit rules.
may do so on margin through a broker-dealer
Instructions have been received from the trusted contact to wire $100,000 from a 72-year-old client's account at a broker-dealer to a designated bank account. To determine that this is a legitimate action not intended to exploit the interests of the client, the broker-dealer A) must place a 10 - business day hold on the request until confirming the request is legitimate. B) may impose a 15- business day hold on the wire request. C) must promptly notify FINRA of its suspicion that financial exploitation may be occurring at the firm. D) must alert its chief compliance officer that such a request was received.
may impose a 15- business day hold on the wire request.
When opening a minor's account, the social security number to be used is that of the A) parent. B) custodian. C) registered rep. D) minor.
minor.
The issuer of a municipal security A) need not be a member of the MSRB, and are not subject to the rules of the SEC, MSRB, FINRA, or NASAA. B) must be a state or local government body selling their securities to Qualified Institutional Buyers (QIB) only. C) must be a member of the MSRB and comply with all securities industry regulations. D) need not be a member of the MSRB or any other regulatory body but must comply with minimum financial standards in order to issue securities.
need not be a member of the MSRB, and are not subject to the rules of the SEC, MSRB, FINRA, or NASAA.
The Series I bond is best described as a A) US Government bond issued at a discount and matures at par. B) marketable US Government bond paying a variable rate of interest. C) non-marketable US Government bond paying a variable rate of interest as an inflation hedge. D) non-marketable US Government bond paying a combination of fixed interest and a variable return.
non-marketable US Government bond paying a combination of fixed interest and a variable return.
A firm has approved a representative's participation in a private securities transaction. In this situation, the firm is required to A) receive monthly updates from the representative of sales activity and compensation the representative receives from the activity. B) report involvement of the representative in this activity to FINRA within 10 business days of granting approval. C) review and supervise the transaction as if it were part of the firm's business. D) pre-approve in writing any transactions that involve the purchase or sale of the securities.
review and supervise the transaction as if it were part of the firm's business.
Joe Schmo recently acquired unregistered stock of a company as compensation for consulting services. Four months later, Joe queries his registered representative as to how he can subsequently sell the shares in the market. The rep could accurately reply that Joe can A) sell the shares to any other investor. B) sell the shares to another investor under Rule 144. C) sell the shares to another investor, under either Rule 144 or Rule 144A. D) sell the shares to a Qualified Institutional Buyer (QIB) under Rule 144A.
sell the shares to a Qualified Institutional Buyer (QIB) under Rule 144A.
A customer emails his broker-dealer requesting a return email with financial information about the firm. The broker-dealer may, in accordance with FINRA rules, A) send a paper copy of its annual statement by mail since financial requests cannot be answered electronically. B) send a paper copy of its most recent balance sheet by mail since financial requests cannot be answered electronically. C) send a copy of its most recent balance sheet by email. D) send a copy of its annual statement by email.
send a copy of its most recent balance sheet by email.
A customer calls his broker-dealer to report that he has lost his job. As a result, the broker-dealer must A) require the representative to ask the customer to make notification of this change in writing. B) close the account if it is no longer suitable for the customer based on the change in situation. C) verify account information with this customer on an annual basis to ensure that the account continues to be appropriate for the customer. D) send an updated account record for verification within 30 days of the receipt of the customer's notification.
send an updated account record for verification within 30 days of the receipt of the customer's notification.
A broker-dealer that gives investment advice is excluded from the definition of an "investment adviser" so long as it receives no special compensation for such advice, and the advice is A) concidental. B) solicited. C) solely incidental. D) casual.
solely incidental. Broker-dealers may give investment advice and remain excluded from the definition of an investment adviser so long as the advice is solely incidental to the conduct of its business and it receives no special compensation for rendering such advice.
Concerning an account opened under the UGMA/UTMA designation, A) there may be multiple custodians and minors in the account. B) there may be multiple account owners but only one custodian. C) there may be only one account owner but multiple custodians are permitted. D) there is one custodian and one minor, who is the owner of the assets in the account.
there is one custodian and one minor, who is the owner of the assets in the account.
Parents want to set up a Coverdell Education Savings Account for their daughter. To be an eligible beneficiary, the daughter must be A) under the age of 18. B) under the age of 30. C) between the ages of 18 and 21. D) under the age of 21.
under the age of 18.
